The world could take heart at the increasing stability of financial market conditions compared to 15 years ago, but growing inequality between rich and poor nations meant that better global governance was needed to oversee the economic policies of major nations, as well as make trade less “bumpy” for certain countries, a Harvard professor said today in a keynote address to the Second Committee (Economic and Financial).
Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy and Economics and a former Chief Economist and Director of Research at the International Monetary Fund ( IMF ), said the exploding growth of global finance since 1995 meant that the Fund, the United Nations and the World Bank must heighten their oversight functions. The rate of borrowing by the United States, which amounted to $800 million a year and totalled 70 per cent of world savings, required dramatic adjustments in interest and exchange rates, and had led the IMF to seek a multi-region deal to smooth those adjustments.
The fact that United States debt was currently funded by the savings of developing countries like China also lent an unusual aura to the global economy, he said. But, in general, globalization was far from being a “catastrophe” and was marked by the growing independence of central banks and better economic policies across the world, which had helped reduce financial volatility over the years. However, geopolitical events had great influence over the world economy and, in fact, the end of the cold war had been a large factor in promoting better policies. United Nations leadership was needed to navigate around a range of lingering obstacles, including wars, diseases, protectionism and climate change.
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